Hey All - hoping for a few quick bullet points on common ways to add value to commercial space. I'm working on a mixed use space. I occupy greater than 50% with a business I own. The other half of the building is rented out for several years.
I have a basement that's unused. A couple hundred square foot outbuilding that is unused (has a garage bay and door access) and a massive parking lot that we don't need.
Would love any ideas. Questions are both anticipated and welcome :)
@Jeff Licciardi the garage seems like the most obvious way to drive NOI in my opinion. In a lot of the areas where I invest, the population density is extremely high and garages are actually in pretty high demand. I have one client that was able to rent out his garage recently at $100 per spot in Cicero, and several of my clients have gotten $100 per spot in the Berwyn neighborhood right next door. I would imagine that garage desirability is a function of density though, so I am not sure how this will play out in your area.
Your parking lot brings up similar ideas for me. Is parking an issue? Is overcrowding on the streets common? Can you put up self storage on the parking lot and rent that out?
As for the basement space, can you easily access it? I keep thinking of self storage as a way to drive returns here, but without knowing your property it is tough to visualize how to use a basement space.
@Jeff Licciardi A lot depends on your property's specific location and the demographics and the demands of a particular area. As @John Warren mentioned, leveraging garage for the extra income could be a viable option if there's a demand in the area for this type of offering. You need to do a bit of research as to what has low supply and high demand in the area and can be easily (or with some tweaks) accommodated by your property.
This suggestion might not necessarily increase cashflow in the short term, but would increase the valuation of your property in the long run. I would consider re-evaluating the lease(s) for the tenant(s) who occupy the rest of the building when it is time to renew leases. If you're able to push off expenses that you're currently paying for to your tenant(s), even if you have to reduce rents by an equal amount, your property will appreciate in value.
Valuation is largely based on consistency and reliability of earnings. If the tenant is taking most or all of that risk, the the less risk you have to incur. That is why long term triple net leased buildings are valued greater than, and sell at lower Cap Rates than say, a building where the owner is paying for utilities, responsible for maintenance, etc even if both buildings generate the same NOI.